Financial experts discredit single pension fund's prospects

14 февраля 2013, 16:30

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Financial experts are casting discredit on the prospects of creation of the single pension fund, Tengrinews.kz reports.

According to chairman of the Pension Funds Association Council Aidar Alibayev, the merger of private pension funds will decrease the pension system’s earning capacity. He noted that the merging procedure itself will involves significant expenses, as the state will actually have to buy out all the private funds totally worth $2 to 4 billion. Besides, amendments will have to be introduced into 22 laws, 8 codes and hundreds of legislative acts. Alibayev stressed that it was impossible to make all this happen before the set deadline of July 1, 2013.

“Where will the funds to buy them out come from? And why spend $2 to 4 billion to buy the private funds that already keep half of all their assets in Kazakhstan government securities, 10% on deposits of our banks and 27% in securities of Kazakhstan companies. That's the total of 87% or over $18 billion! And only 10% is kept in foreign securities. What exactly can be efficiently improved here?" Alibayev said.

"If, as Marchenko says, we keep half of the assets abroad, the profitability will drop. For example, the profitability of the National Fund made 1.37% in 2011. The single pension fund managed by the National Bank will lower the existing profitability even further. Just for comparison, the accumulated profitability of all the pension funds over the past 15 years has been 1.5 times higher than the inflation level,” Aidar Alibayev continued.

Besides, the expert noted that private funds have more qualified managers than state officials. Alibayev expressed concern that the state would not be able to properly manage the pension savings it receives.

He said that every pension fund has its own development program and technological features. This will make the merger process quite complicated. The expert added that the merger would mean axing of around 12 thousand qualified employees of the pension funds and leaving them unemployed.

Another problem is that the depositors will have to sign new contracts with the single pension fund. According to chairman of Uly Dala movement Gabiden Zhakeyev, not all the citizens will eagerly agree to that, as many of them will not want to transfer their savings to state managers. According to him, around 5 million depositors have signed contracts with private funds and transferring money into the single fund without the owner’s consent would be illegal.

Nevertheless, the world has seen several examples of successful merger of pension funds. President of the Independent Entrepreneurs Association Talgat Akuov pointed out that a similar reorganization helped Norway to increase stability of the system in general. However there was a significant difference in the Norwegian case: the Norwegian pension funds merged with the oil fund that provided additional financial warranties to the whole system and this ensured the reform’s success, Akuov said.

As for Kazakhstan, Akuov believes that private pension funds have been stably managing the savings without the coming merger. According to him, the funds’ profitability has been 1.5-fold the country’s inflation rate.

Earlier Director of Rakurs Economic Analysis Center Oraz Zhandossov said that the single pension fund would not help the Kazakhstan citizens solve their main problem: to save enough money for a comfortable retirement. He added, however, that Kazakhstan citizens should not be concerned about any system risks of the single fund, same as they should not expect any changes in the rules governing their pension payments.
“Investing the pension money into long-term and not very clear infrastructure projects is risky. The pension savings of the citizens, being private savings, have to be safeguarded more seriously than even the money of the National Fund. But I would not guarantee than, much will depend on the legal base. Unfortunately, it is still a rather closed process. The group is working under Kelimbetov’s leaderships (Kairat Kelimbetov, deputy Prime-Minister of Kazakhstan) and making some statements from time to time. There has been no extended expert discussion so far,” Zhandossov said.